Australian business sentiment fell back in August after a solid improvement in July as weakening outlook for commodity prices toppled confidence in the mining industry, the National Australia Bank (NAB) said in its latest survey published on Tuesday.
The business confidence index fell to -2 in August from 3 in July. Mining was the worst affected industry, although most sectors saw weaker confidence levels on the back of global uncertainty. A notable exception was retail where lower rates seem to have offset these impacts, NAB said.
At the same time, the business conditions index rose to 1 in August from -3 in July. However, the levels of activity remain subdued.
The improvement was driven by broad-based improvements in trading conditions, profitability and to a lesser extent employment.
Businesses' demand for credit increased in August helped by rate cuts by Reserve Bank of Australia over the past eleven months. However, overall lending conditions were difficult, the NAB report said.
The RBA, led by Governor Glenn Stevens, retained the benchmark cash rate unchanged at 3.5 percent for a third consecutive rate-setting session held on September 4. According to the central bank, some commodity prices of importance to Australia have fallen sharply in recent weeks.
Stevens has said that the impact of earlier policy changes is still working its way through the economy. Australia has the highest borrowing costs among the developed economies, even after a cumulative 125 basis-point reduction in cash rate since November last year.
The economy expanded 0.6 percent sequentially in the second quarter of 2012 following 1.4 percent expansion in the first quarter.
by RTT Staff Writer
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